Having the potential for growth that exceeds the capability of your existing systems is a good problem to have, but it is still a problem. Groupe Dynamite, a fast-fashion women’s apparel retailer based in Montreal, faced that very challenge in early 2010.
“We had a highly customized legacy environment and a strategic plan to go global that were not congruent,” said Ian Booler, senior director business transformation and project management, Groupe Dynamite, which operates 300 stores under the Garage and Dynamite banners in North America and the Middle East. “We needed to invest in a new technology platform to get to another level.”
Fast Fashion, Methodical Rollout
With the assistance of Deloitte, Groupe Dynamite conducted a one-year analysis of its retail enterprise environment, and narrowed platforms down to Oracle and a couple of other retail enterprise vendors. According to Booler, the company selected Oracle Retail because it was the most adaptable to the specific requirements of the fast-fashion vertical and had a proven integration path to the TradeStone and MID allocation software applications, which were already deeply embedded in the best-of-breed framework at Groupe Dynamite.
Groupe Dynamite signed a licensing agreement with Oracle in June 2011, and in November 2011 selected Tech Mahindra as an integration partner. The two companies spent the next three months developing an integration and design blueprint, while Deloitte helped Groupe Dynamite scale its Manhattan Associates warehouse management system for the new, improved enterprise environment.
Detailed design then took until November 2012, when Groupe Dynamite started unit testing and then integration testing that lasted until April 2013, followed by an intensive round of user acceptance testing in the summer to ensure the platform would properly integrate with all applications and financial systems used by the organization.
In September 2013, Groupe Dynamite was finally ready to run two pilots — one on the Oracle Commerce platform for the launch of its Dynamite banner’s transactional website, with links to its existing Manhattan Associates warehouse management system, and another pilot focused on the distribution of store supplies using the Oracle Retail Merchandising System (RMS).
All Systems Go
Pilot results for the Commerce site included a tripling of forecasted sales volume on the Dynamite site and confirmed ability to accurately ship and receive goods in both retail stores and customer locations. In February 2014, Groupe Dynamite cut over all its retail and franchise stores to the new Oracle environment. Groupe Dynamite has also rolled out a shared online shopping cart for the Groupe Dynamite and Garage e-commerce sites, and is currently piloting Oracle Retail Point of Service (POS).
The new SOA platform has allowed for real-time integration of some key applications and increased transaction volume capabilities, with allocation message volume rising from 20,000 daily messages to 100,000 daily messages, as well as the ability to process them in real time.
“Once we roll out Oracle POS, we will have a real-time view of inventory at the distribution center and in the Store Inventory Management (SIM) system,” said Booler. “The Oracle Commerce platform now provides our customers with the ability to look up in-store inventory from all parts of the enterprise. With the Oracle POS, the stores’ inventory will be updated in a near real-time basis.”
Retailers are taking advantage of the mobile channel for an increasing number of activities, including personalized marketing, in-store traffic monitoring and customer recognition. However, while using the mobile channel to create temporary POS stations might be less flashy than some of these other applications, letting customers “surf” between fixed and mobile POS terminals can be an effective means of improving both the customer experience and store profitability.
A Night at the Opera
“We use temporary mobile POS stations both in the gift shop and more frequently in the opera house during performances,” said Hope Van Winkle, director of merchandising for the Metropolitan Opera in New York City. “Our season runs from September to May, and we have the American Ballet Theatre in the summer for six days a week. There are tables in the house selling merchandise related to the performance that are essential, but not permanent. They go up and down nightly.”
Metropolitan Opera has been using temporary mobile POS terminals to ease sales at the temporary tables and also reduce crowding in the gift shop since 2008. In 2012, the retailer switched to a mobile solution based on Motion Computing CL910 Slate Mate hardware and Celerant Command POS software. This solution provides Metropolitan Opera with a single view of inventory across all channels, which it previously lacked.
“We have two mobile POS stations in the house and two in the store,” Van Winkle explained. “It has improved the customer experience because we don’t have more fixed stations where they are purchasing goods. The gift shop is small and gets packed during ‘go in’ before a performance; mobile checkout helps ease long lines. When you’re buying something you want it done. The customers love it.”
Metropolitan Opera is pleased enough with its POS “channel surfing” during peak times that it is continuing to look at opportunities to expand its use of mobile POS within the opera house.
“We are looking at ways to use mobile POS more efficiently,” Van Winkle added. “We’re planning on relocating the fixed registers in the gift shop. It would be nice not to have them at all.”
More Limited Opportunities
During the past few years, U.S. and international retailers have flocked to Canada in the hunt for top-line growth as store portfolios matured in the United States and there were fewer opportunities for expansion. In fact, many U.S. retailers considered Canada to be an extension of their domestic businesses due to the similarities and close proximity to their home offices.
Aside from the well-publicized issues experienced by Target and Big Lots in Canada in 2013, the Canadian retail industry suddenly slowed in 2013, with comparable-store sales only up 0.3% over 2012. (This included all sectors other than food and auto, according to Retail Council of Canada’s “Retail Fast Facts Report” in February 2014.)
From all accounts, Canada has moved lower in growth priorities for U.S. and international retailers in the past few months — particularly given its saturated market in most retail sectors. Looking at the discount broadline sector, there isn’t much opportunity for a major new entrant given the dominance of Walmart and Costco in the Canadian market, coupled with the 2013 launch of Target Canada and continued strong growth of TJX Canada.
Similarly, the strength of Dollarama in Canada and the recent growth of Dollar Tree following its entry into Canada by acquisition, make it unlikely for another extreme value chain to enter Canada on a large scale.
Even the Canadian food retail sector is hyper-competitive, with strong players (Loblaw, Sobeys, Metro, Overwaitea, Longos) in all key regions. This, coupled with the addition of significant growth in square footage in the past few years, makes it difficult for a new entrant of any scale.
In the drug sector, the recent sale of the leading Canadian national drug chain, Shoppers Drug Mart, to Loblaw, the leading Canadian food retailer, leaves the stronger regionals (Rexall, London Drugs, Pharmasave and Jean Coutu) as the key large independent players.
The recent deal announced for DSW to enter the Canadian market through the purchase of a 44% stake in the leading Canadian branded footwear retailer, Town Shoes Limited, is excellent. It follows the strategy employed by strategic buyers Best Buy and Dollar Tree when they entered Canada through the purchase of Canadian retailers Future Shop and Dollar Giant respectively, in contrast with the numerous other market entrants who have pursued a greenfield strategy.
However, the issues being experienced in Canada are not uniform across all sectors. There is still significant opportunity for new entrants in some sectors into the Canadian retail market, particularly in luxury and specialty apparel, where there is limited competition.
The anticipated arrival of Nordstrom and Saks will be welcomed by Canadians, as they are world-class retailers that Canadians know well from their shopping in the U.S. and from online purchasing.
Further, the existing number of choices in the Canadian luxury space is limited, with only two national chains — Holt Renfrew and Harry Rosen — and a number of independent operators.
There is also significant opportunity in the fashion apparel, fast fashion, plus-size apparel, moderate women’s apparel and related sectors, as there are no clear owners of these sectors in Canada.
There will continue to be room for strong retailers to expand into Canada, provided they have a clear value proposition with a well-differentiated store and assortment offering. Canadians are experienced cross-border shoppers (cross-border shopping is a way of life for numerous Canadians). As such, they are well aware of pricing and have high expectations for U.S. chains opening in Canada. This sets a high bar for U.S. entrants into Canada, which has caused some well-known U.S. retailers to stub their toes on entry with prices and assortments that were out of line with their U.S. domestic stores, resulting in negative publicity and price modifications post launch.
Entrants into the Canadian retail industry need to be aware of the complexities of operating in Canada. These include a weaker Canadian dollar putting pressure on margins in a low inflationary environment, dual-language packaging needs and the higher distribution costs resulting from a small population in a large geographic area.
The higher inflationary costs coming out of China will continue to put pressure on input costs, not all of which can be passed onto consumers in the form of higher prices in a very competitive retail industry.
Also, the Canadian online retail sector has finally come of age and is going to continue to take market share from brick-and-mortar stores, putting further pressure on brick-and-mortar retailers in Canada. Last but not least, a solid understanding of the costs of doing business, the different nature of consumers and the widely different drivers of the regional economies in Canada are crucial to success.
Antony Karabus is CEO of Hilco Retail Consulting and has been advising Canadian and U.S. retailers for 25 years.
Despite a saturated market, there are still strong opportunities for luxury, fast fashion and plus-size apparel. But there isn’t much opportunity for major new entrants in the discount broadline sector. And the food retail sector is already hyper-competitive, with strong players.